Healthsouth shareholders' attorneys: Scrushy knew about fraud

Lawyers for shareholders of HealthSouth Corp. lit into Richard Scrushy during their closing arguments in his civil case, saying he exhibited conscious disregard for his job.

Closing arguments in the case started today in Jefferson County Circuit Court, where share holders for Birmingham-based HealthSouth are suing the former chief executive for $2.6 billion in damages.

Shareholders say Scrushy owes the company that much because he was either so careless he should punished, or because he was a participant in the $2.7 billion fraud that engulfed the physical therapy company.

"A fraud in the billions?" HealthSouth shareholder lawyer John Somerville said to Jefferson Circuit Judge Allwin Horn. "A CEO had to have known."

Richard Scrushy, shown in this 2007 file photo.

During 10 days of testimony that ended Friday, Scrushy and his lawyers didn't dispute the fraud. They said junior executives faked profits and assets and now are trying to pin it on him. Scrushy testified for three days and was then returned to federal prison in Texas where he is about two years into a seven-year sentence for bribing former Alabama Gov. Don Siegelman.

Attorney Ralph Cook, also representing shareholders, told Horn the testimony of five former chief financial officers who say Scrushy did it contains some credibility, even if they are felons who admitted to the fraud. All five quit under duress within a short time of each other, Cook said.

"I would suggest it is not common for a publicly traded company to go through that many chief financial officers," said cook, a former Alabama Supreme Court justice . "I would submit the evidence we submitted more than satisfies our burden of proof."

A third lawyer for HealthSouth shareholders, Frank DiPrima, said his side presented ample evidence that Scrushy exhibited conscious disregard for his position. That evidence during the trial included his personal use of corporate assets such as airplanes and ignoring subordinates who were not in on the fraud and who told him the company's books were suspicious.

Horn will decide the case alone, without a jury, which was dispensed with by mutual consent of the parties.

The fraud that ran from 1996 through 2002 almost ruined HealthSouth, then the largest operator of physical therapy clinics, with 2,300. Shares fell 90 percent to less than a dime, thousands of workers were let go, and clinics were shut or sold. The company has since recovered after severing all ties to Scrushy, and now operates 100 hospitals for the physical rehabilitation of the seriously ill and injured.